Community Development Innovation Review

April 2013

Community Reinvestment Act (CRA) Banks as Pioneer Investors in Pay for Success Financing


Pay for Success (PFS) financing, sometimes known as social impact bonds (SIBs) or social innovation financing, has attracted much attention because it offers the promise of governments paying only for successful programs while increasing funding for prevention programs by accessing capital markets. To understand the emerging PFS investment landscape and determine the structures and investors that are most likely to attract incremental capital, we spoke with more than ninety investors and other stakeholders as part of an eight-month research project. Our aim was to highlight distinct investor concerns, preferences, and insights that inform the systems, structures, and sequence critical to building a healthy and sustainable market for PFS financing. During our research, Community Reinvestment Act (CRA) financial institutions emerged as potential early investors in this new market. While philanthropy is expected to fund early PFS financings, CRA capital could prove to be the best bridge to other commercial investors. This article addresses how PFS financing can fit into CRA portfolios and outline some of the opportunities and challenges of executing PFS arrangements within CRA-regulated financial institutions.

Download the article (pdf, 152.87 kb)

Other articles in this issue

The Real Revolution of Pay for Success: Ending 40 Years of Stagnant Results for Communities

Pay for Success is Not a Panacea

The Promise of Pay for Success

Social Impact Bonds: Lessons Learned So Far

Pay for Success: Understanding the Risk Trade-offs

The Ethics of Pay for Success

Learning from the Low Income Housing Tax Credit: Building a New Social Investment Model

Using Social Impact Bonds to Spur Innovation, Knowledge Building, and Accountability

Social Impact Bonds: Using Impact Investment to Expand Effective Social Programs

Innovation Needs Foundation Support: The Case of Social Impact Bonds

Pay for Success: Opportunities and Risks for Nonprofits

Success Begins with a Feasibility Study

Government’s Role in Pay for Success

Rikers Island: The First Social Impact Bond in the United States

Human Capital Performance Bonds

Pay for Success: Building On 25 Years of Experience with the Low Income Housing Tax Credit

Can Pay for Success Reduce Asthma Emergencies and Reset a Broken Health Care System?

Supporting At-Risk Youth: A Provider’s Perspective on Pay for Success

Tax Increment Finance: A Success-Driven Tool for Catalyzing Economic Development and Social Transformation

Bringing Success to Scale: Pay for Success and Housing Homeless Individuals in Massachusetts

Making Performance-Based Contracting Work for Kids and Families